Automotive credit

On the market for consumer loans, a tendency continues for providing easier terms for automotive credit.

Akzhol Sadeshov

Due to the fact that second tier banks are becoming more and more active in the sphere of provision of credit for the purchase of automobiles, every year such loans become more accessible to many citizens. If several years ago only a few banks provided automotive loans, currently one-third of all banks are doing so. Three more banks still not active in this market segment are planning their future entrances.
As a consequence of increased competition among banks for borrowers, which has resulted in a decrease in the requirements of banks as regards to eligibility, takers of credit have gained an advantage. Currently, an automobile can be purchased on the following terms:
• Down payment amount varies between 15-30% (if the security is to be the car itself)
• Interest rate applied is from 10-15% per annum in U.S. dollars, or from 12% in Kazakhstani tenge
• Credit period can be up to 120 months
• Minimum credit issued is US$1000, or its tenge equivalent

This article and the attached chart are meant to show the standard available terms for those individuals taking out loans for the purchase of cars through automotive dealers. The assumed collateral is the automobile itself. However, a borrower can also pledge alternate security, such as other cars or property.
If the value of the collateral covers 100% of the purchase price of the car, then the purchase can be made without an initial down payment. In December 2005, a new credit scheme began to be applied, which involved a bank providing credit for the purchase of a new car from a partner automotive dealership under the following terms:
• No down payment
• Security is the purchased car itself
A more detailed and structured picture of the domestic automotive credit market is presented in the following table.